“Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation.” – Peter Drucker
Neglected and stale organizations, profit or not-for-profit, fail, sooner or later. Innovations reduce the risk of failure and are part of the tool kit of entrepreneurs. Innovations exploit change as an opportunity to innovate and revitalize an industry, a market or a service.
Purposeful innovation goes beyond spontaneous bright ideas. Instead, bright ideas when systematically analyzed and tested can result in radical change. As a graduate student in the Drucker Management School in Claremont, California, I was privileged to listen and reflect on Peter Drucker’s wise lectures. In his Austrian accented English he would caution us, his students, that “the purpose of business is survival….to survive is to continually innovate… not to innovate is more risky than to it is to innovate.” Drucker was not impressed with bright ideas unless we as students could provide a systematic analysis of how these ideas would work. He showed no favoritism to CEOs who flew in once a week to sit in his classes or new graduate students who had little organizational experience. He would not accept anything less than an ‘A’ paper. Hence, he would tell us if it took three or four revisions until we got it right he would reread and regrade – on his own time – until we understood what systematic innovation required. He explained, he cautioned and encouraged us to think. We learned!
His classic book titled “Innovation and Entrepreneurship Practices and Principles” is a treasure to read. He advocated social entrepreneurship well before it became the catchy phrase of today. He did not differentiate between business entities or nonprofit organizations. Among our students were executive directors from charities, pastors from mega churches and executives from companies as far away as Detroit and San Francisco.
The seven sources of innovation was the substance of the course. Drucker stressed that to engage in innovation requires an attitude of flexibility, openness to change and continuous learning. He broke the seven innovative strategies into two categories: four sources of innovation are within the organization while three sources are to be found outside of the organization.
The four sources of innovation within the organization are:
1 – The unexpected success or failure should be noted and investigated because these can signal changes that are either opportunities or threats. Either way, the unexpected requires attention and analysis.
2– Incongruity between realities as is or as it is assumed to be. Something is not right and has changed – check it out and identify what has changed.
3 – Potential innovation based on process need. Can the process/task be changed from what was an old and outdated standard? Are new tools available? Can the process be partially eliminated or outsourced?
4 – Changes in industry structure or market structure that impact the internal operations. An organization that grows too fast or has lost market share due to technological changes has an opportunity to innovate
Innovations outside the organization:
1 – Demographic changes – this offers a wealth of opportunities. For example, the demographic changes in Clark County may be unnoticed to many, but the population growth is made up of an enormous percentage of newcomers with different tastes and expectations. The newcomers are more urban in taste and tend to stray to Portland.
2 – Changes in perception and mood – attitudinal changes in eating, lifestyle and social activities should be analyzed to add to or remove products or services.
3 – New knowledge – a good example is the use of social media and technology for services and entertainment. For example, the use of technology has changed the retail industry drastically, and adapting is necessary.
Innovation is serious business and can make or break the life of an organization. To innovate is to refresh and stay viable.
Lucia Worthington teaches business and management at Clark College.